22 July 2026

250 Million Tonnes by 2040: The Market Breakthrough for Carbon Dioxide Removal Has Arrived

With its proposal to revise the EU Emissions Trading System (EU ETS), the European Commission has initiated a paradigm shift. For the first time, Carbon Dioxide Removal (CDR) is set to become part of the European Emissions Trading System. This lays the foundation for a European compliance market for high-quality carbon dioxide removals—and creates an entirely new framework for investment in negative emissions.

Why This Proposal Matters

With this proposal, the European Commission grants Carbon Dioxide Removal its long-awaited recognition as a core climate policy instrument. Carbon dioxide removal is an essential component of Europe’s climate strategy. Until now, the scale-up of carbon dioxide removals has been financed primarily through voluntary carbon markets. With the ETS proposal, the EU is now, for the first time, opening the prospect of a regulatory market with long-term demand for high-quality carbon dioxide removals.

For project developers, investors and companies, this creates significantly greater planning certainty. Where reliable demand exists, business models can emerge. And where business models emerge, large-scale investment becomes possible. This is precisely why the proposal marks a potential turning point for Carbon Dioxide Removal in Europe.

How Will the New Market Work?

At the core of the proposal is the gradual integration of permanent carbon dioxide removals into the European Emissions Trading System. Between 2030 and 2040, up to 250 million tonnes of permanent, domestic Carbon Dioxide Removal are to be included. Initially, only CRCF-certified DACCS and BioCCS projects will be eligible. The possibility of opening the system to additional CDR pathways remains part of the ongoing political process and future review cycles.

Further Changes to the EU ETS

In addition to integrating carbon dioxide removals, the Commission’s proposal includes numerous other changes to the EU ETS. These include:

• a more gradual decline of the ETS cap and the continuation of emissions trading beyond 2040,
• an adjustment of the Linear Reduction Factor (LRF),
• a reform of the Market Stability Reserve (MSR),
• the establishment of an Industrial Decarbonisation Bank from 2028 onwards,
• the obligation for Member States to invest at least 50% of their ETS revenues in decarbonisation,
• the gradual inclusion of municipal waste incineration plants in the EU ETS.

These measures are intended to support the decarbonisation of European industry while accelerating the deployment of climate-friendly technologies.

DVNE Assessment

Positive

The DVNE welcomes the European Commission’s proposal.

• From the DVNE’s perspective, the planned integration of permanent carbon dioxide removals into the EU ETS lays the foundation for a European compliance market.
  
• The proposed target volume of up to 250 million tonnes by 2040 provides important guidance for market scale-up and sends a strong investment signal to project developers, investors and buyers.
  
• The DVNE particularly welcomes the creation of a central European purchasing mechanism for CRCF-certified carbon dioxide removals based on a portfolio approach.
  
• We also welcome the link to the Carbon Removal Certification Framework (CRCF), which establishes a common quality framework for integrity and transparency.

Need for Further Improvement

At the same time, the association sees a need for further amendments and clarification in several areas.

• The DVNE continues to advocate for a technology-open approach. In the long term, all high-quality carbon dioxide removal approaches should be eligible, provided they are supported by robust monitoring, verification and liability mechanisms.
  
• We call for the early recognition of Biochar Carbon Removal as a permanent carbon removal pathway under the Carbon Removal Certification Framework (CRCF). Clear requirements for monitoring, reporting, verification and liability have already been established in Delegated Regulation (EU) 2026/285.
  
• We also call for clear prospects for the recognition and financing of nature-based carbon dioxide removal processes in future, additional compliance markets.
  
• Additional financing mechanisms are necessary to enable CDR projects to become economically viable before the first tonne of CO₂ has been delivered.
  
• The possible use of international credits must not weaken the impact of domestic climate action. Clarity on quality and integrity requirements is needed as quickly as possible. In addition, removal credits should be prioritised over avoidance credits.
  
• Overall, the proposed changes would make the EU ETS significantly more flexible. It is therefore crucial that emissions trading retains its function as the EU’s central instrument for achieving European climate objectives and continues to provide effective incentives for both emissions reductions and high-quality carbon dioxide removals.

What Happens Next?

The European Commission’s proposal marks the beginning of the European legislative process. The European Parliament and the Council of the European Union will now deliberate on the ETS revision. The Irish Presidency of the Council aims to reach a common position among the Member States later this year. A political agreement could be reached in the first quarter of 2027. Until then, it will be decided how the future European market for carbon dioxide removals will ultimately be designed.

Conclusion

The ETS revision is far more than a technical adjustment of the European Emissions Trading System. For the first time, the European Commission proposes a concrete mechanism to integrate Carbon Dioxide Removal into a regulatory market.

For the scale-up of negative emissions in Europe, this would represent a paradigm shift: away from financing that relies almost exclusively on voluntary markets, towards a European compliance market with long-term demand signals.

Whether this will ultimately result in the anticipated market breakthrough for carbon dioxide removals will be determined during the upcoming negotiations. A strong EU ETS with rising carbon prices remains essential to maintain pressure for decarbonisation. Without this pressure, there will also be no incentives for CDR. One thing is already clear: Carbon Dioxide Removal has arrived in European climate policy.